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The IUP Journal of International Relations
Focus

Thomas Schelling, the economist and nuclear strategist, who, shared the 2005 Nobel Prize in economics with Robert J Aumann for “having enhanced our understanding of conflict and cooperation through game-theory analysis”, died on December 13, 2016, aged 95. So much has been said and written about his enormous intellectual contribution to our understanding of the ambiguous conflict between the communist bloc on the one hand and the United States and its free world allies on the other in the 60s. And in its anxiety to pay tribute to this legendary thinker your Journal too attempts here to map his contributions towards the “most spectacular event … we have enjoyed 60 years without nuclear weapons exploded in anger.”

It is relying on clear logical reasoning rather than esoteric mathematics and cutting across economics, sociology, political science, law, philosophy and anthropology that Schelling presented an elementary theory of international politics in his much talked about book, The Strategy of Conflict. Here Schelling, relying on game theory—a means to study the choices people make in different circumstances—presumes that the actors involved in the strategic interactions act rationally, for people essentially try to maximize their expected gains and therefore, he assumes that nations while formulating strategy, usually act rationally and they assume their rivals too will do the same.

Proceeding further on this premise, Schelling says that international conflicts are not “constant-sum games” but “variable-sum games.” So, most conflicting situations are essentially ‘bargaining’ situations. And bargaining “seeks outcomes that, though not ideal for either party, are better for both than some of the alternatives.” And here he emphasizes that in any interactive situation it is vitally important to look at matters from the side of the other party, for “in diplomacy each somewhat controls what the other wants.”

Now, to realize the desires from a bargain, Schelling proposes exploitation of potential force as a strategy instead of application of force. And thus emerged the theory of coercion: the art of using “the power to hurt” to obtain what one desires. Schelling explains that the success of brute force depends on the strength of the opponent but the success of coercion depends upon his interests. Therefore, he asserts that knowledge of an enemy’s desires: what he loves and how much he will endure before parting with it, is a must. To put it otherwise, the sheer threat of pain that is decoupled from the threat of victory can induce an enemy to comply with one’s demands. And with the dawn of nuclear weapons, coercion became the very tool of international politics, for with nuclear weapons, as Schelling explained, “the power to hurt is more impressive than the power to oppose.” For, nuclear weapons, besides being operable with great speed, they enable even defeated states to use them.

For coercion to be successful, an enemy must believe not only the threat of pain but also the assurance of its absence, once he complies. So, commitment to do what one said is a must for coercion to succeed. But commitments are often found exceedingly difficult to make. It is in exploring how and under what circumstances, one can make the commitment credible, Schelling borrowing a concept—”last clear chance”—from insurance law, advised that policy options should be eliminated preferably to one. Here his dictum is: “when coercing an enemy it pays not to have the next move—if the next move is the last chance to avert disaster.” He illustrates this point saying: let America place troops in Germany so that if USSR invades, America would automatically be drawn into war whether it likes it or not. For, its national honor is at stake. This sense of commitment, of course, poses an obvious challenge to students of international relations: “anarchy of ungoverned spaces”—between nations, it becomes difficult to enforce punishment with absolute certainty for not doing what has been promised. In other words, how can a nation impress upon the others that it will take certain actions which it never actually intends to, if it fails to do what has been asked for?

It is in proposing an answer to this question that the brilliance of Schelling gleams: brinkmanship—”the tactic of deliberately letting the situation get somewhat out of hand, just because its being out of hand may be intolerable to the other party and force his accommodation.” Elaborating it, he says: “international relations often have the character of a competition in risk-taking, characterized not so much by tests of force as by tests of nerve...the perils that countries face are not as straightforward as suicide, but more like Russian roulette.” Calling this kind of threat a crisis diplomacy, Schelling cites the compellent action US took in the Cuban Missile Crisis that forced Soviet steamship carrying missiles to turnaround but also got the USSR to remove the missiles from Cuba, as an illustration. Indeed, it is this idea of “the threat that leaves something to chance” that defined the nuclear politics of 1952-1989.

There is however a danger embedded in brinkmanship strategy: accidental war. Though many of the deadliest conflicts in history emerged out of this dynamic—‘fear of surprise attack’ driving a country to attack before its enemy—with nuclear weapons there emerged a pacifying effect: they diminished the power of surprise, for superpower’s nukes could survive a first strike and inflict equal damage to the attacker’s country. Hence, Schelling suggests that any strategy that aims at averting ‘surprise-attack’ must have an objective of “safety of weapons rather than the safety of the people.” In other words, the threat of ‘deterrence’ remains credible if only a country safe keeps its nukes.

Focusing on Korean War, Schelling observes that Soviet Union and United States exhibited restraint in the way they fought so as to reduce the risk of nuclear escalation. But the big question is: What level of restraint is required to avoid nuclear escalation? To answer this dilemma—the problem of multiple equilibria—Schelling proposes: concept of a focal point. Observing that coordinative solutions in games were arrived at more often than theory would predict, Schelling says that focal points are often emerged out of actor’s shared frames of reference, such as social conventions and norms. And as an example he cites ‘nuclear taboo’—our willingness to avoid nuclear weapons for even seemingly innocuous purposes.

The seminal theoretical contribution of Schelling—coercion, commitment, brinkmanship and focal points—has however attracted certain criticism: one, his reliance on rationality of people is considered absurd for people are so obviously irrational; two, no rational man would like to get himself first caught in a crisis for brinkmanship to work; three, the morality of his applying game theory methods to nuclear conflict; and four, his theories not being backed by data. Despite criticism, the ideas developed by Thomas Schelling influenced Cold War strategies of the US enormously. According to the historians of Cold War, Schelling was ubiquitous in the field of international conflict, for his theory of coercion remains as important today and in the days to come as in 1966. The world owes a profound debt to Professor Thomas Schelling for his strategic role in maintaining that nuclear peace and your Journal is sure that his curiosity and ethic of public service continue to inspire us all.

-- GRK Murty
Consulting Editor

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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